Public Bill Committee

[Mr. Martin Caton in the Chair]

The Committee deliberated in private.

On resuming

Martin Caton: May I remind Members and witnesses that we are bound by the deadline agreed to on Tuesday? That means that this afternoons evidence session must end at 2.30 pm. I hope that I do not have to interrupt Members or witnesses in the middle of their sentences, but if that time arrives, I am afraid that I will have to do so.
We will now hear evidence from Dr. Tess Ridge, Donald Hirsch, Mike Brewer and Neil OBrien. Welcome to our meeting. Would each of you like very briefly to introduce yourselves and your organisation, starting with Dr. Ridge?

Dr. Ridge: I am Dr. Tess Ridge. I am a senior lecturer in social policy at the university of Bath. I imagine that I am here because I have a considerable amount of experience in carrying out research with low-income children and their families.

Donald Hirsch: I am Donald Hirsch. I am head of income studies at the centre for research in social policy at Loughborough university. I have done a lot of work for the Joseph Rowntree Foundation, initially in calculating what it would take to meet some of the child poverty targets and, latterly, looking at the cost of child poverty and at what a longer term strategy might entail.

Mike Brewer: I am Mike Brewer from the Institute for Fiscal Studies. I have done research on tax credits, on welfare to work policies for lone parents and on trends in child poverty.

Neil O'Brien: I am Neil OBrien. I am director of Policy Exchange, which is an educational charity looking at a wide range of public policy issues.

Q198 1John Barrett (Edinburgh, West) (LD): I would like to ask each of you to what extent you think that the Bill is going to be an effective means of tackling what is a very complex issue. A number of witnesses have gone over a range of issues that the Bill does not tackle. I think that all members of the Committee appreciate how complex the issue is; passing legislation is clearly not going to deliver the end result on its own. Could you say how effective it will be and how much support you think that the legislation might have?

Martin Caton: Can we stick to the same batting order for answering questions?

Dr. Ridge: Okay. May I start by saying that I very much welcome the Bill? I think that it is a very important mechanism for keeping childrens needs and concerns central in the policy process. They very easily drift out to the marginsthat has certainly happened in the pastwhich is to their disadvantage. I agree with you completely, John, that povertyand family povertyis an exceedingly multifaceted issue, and tackling it needs many different approaches. The Bill in itself is an important part of that, in the sense that it has a strategy of focus, annual reports and a framework to keep childrens needs central in policy as we go through time, so I think that that is very important. There are aspects of the Bill that I would like to see strengthened, and it cannot exist on its own, of course. There have to be very important, very well thought-through strategies right across the board to get some real developments in the area.

Donald Hirsch: I agree with all that and I certainly agree that while having the Child Poverty Bill is helpful, because of the signals that that sends out, it can do very little on its own. Perhaps the most important thing in the Bill and the way that it is followed through is the requirement to have a specific broad strategy. Of course, everything will be on what that strategy ishow specific and how tough it is, and how much leverage it has.
There are several things that really have not been planned for in a coherent strategic way over the past decade, in terms of what is going to contribute to reducing child poverty. One of those regards the whole benefits and tax credit system. There is no systematic way to ensure that the amounts being received by families with children on low incomes even keeps up with rising incomes generallywhen they do riselet alone makes progress towards narrowing the gap, which is what would be required.
A second big one is about the types of jobs that people move into and the ways in which you can reduce in-work child poverty without an excessive burden on in-work tax credits. The thirdon which, to be fair, there have been strategies but they have not proved adequateis on child care and how genuinely adequate that is, in terms of making opportunities available to families.
I mentioned all those because they are three things in which something pretty big needs to happen. I would judge the effectiveness of a strategy by how tough it is on things like that in really planning forward to create a significant change, rather than just small changes at the margin.

Mike Brewer: I cant really see what the Bill would achieve that Government action could not do. The Government missed their target in 2004, and it looks like they will miss their target in 2010. I think they would have missed it even if they had had this Bill 12 years ago. The Government publish indicators at the moment, in the Opportunity for all reportothers are proposed in the Billbut still they missed their targets in 2004 and 2010. The reason why they will miss their targets in 2010 is because of a lack of money. The child tax credit is not high enough. The Government have not yet found the political will to raise taxes and increase spending on tax credits, and I cannot see what the Bill will change, compared with the current arrangements.

Q 2

John Barrett: Do you think that it is effectively hot air? It sounds like something is being done, but not a lot is being done. Is that what you are saying?

Mike Brewer: I welcome the individual things in the Bill, but I question whether you need all 650 MPs to sit round and talk about it for something to come about. Why do you need an Act of Parliament to do it? Why cant the Government just say, as they do at the moment, Were going to have an annual report on poverty and were going to measure progress by these indicators? Ultimately, what counts is the strategy of the Government, or future Governments. This Government said that they were serious about child poverty. They had high-profile targets and an annual report, but still missed the target. I do not see why an Act of Parliament would change that.

Neil O'Brien: The good thing about your question was your point about the problem being complex. The good thing in the Bill is the broad-based strategy to deal with that. The bad thing in the Bill, from my point of view, is the narrowness of the legally binding targets. What you have is not a child poverty target; it is an income inequality target. That strongly drives you relentlessly towards downstream intervention to give people income, rather than upstream intervention to tackle the causes.
For example, the IFS points out that you could spend £4 billion and hit the target by giving people more through the tax credit system. But would that be the best use of £4 billion for tackling long-term child poverty? That is less clear. The strategy recognises that, but the targets do not. It would be better to have a set of targets, or a set of indicators, that are more broadly based on opportunities for jobless households, low educational attainment, substandard housing, infant mortality, teenage smoking, teenage pregnancy and children in care who do not get adopted. The Government have recognised that there is a tension there. Yvette Cooper said that the child poverty targets had never just been about poverty, but had always been about narrowing unfair inequalities. That might be a good thing, but there is a trade-off between tackling inequalities and tackling child poverty.
The other problem with rather narrow, income-based targets is that they do not tell you too much about the depth of poverty. Because incomes cluster just above the lineyou know all this stuffit is possible to bring about big changes in the headline rate by giving people just enough money to get over the line. In a sense, it is an arbitrary line. If you look at a measure based on 50 per cent. of median income, you would have the same number of people in poverty as in 1997. If you look at 40 per cent. of median income after household costs, it looks like there is more poverty. I am not saying that there is overall more poverty, I am just saying that it is, in a sense, an ambiguous and arbitrary measure. You might be better off tying your targets to your broader strategy and using those concrete measures instead.

Q 3

Steve Webb: Obviously, we are in a recession, but most of the statistics that we have got so far are pre-recession. I wonder if I could askinitially to get the IFS perspective, although others might want to commenthow you think that the recession will impact on the level of child poverty on these measures.

Mike Brewer: Colleagues of mine carried out research to look at what happened to poverty as measured by the Government in previous recessions. It shows that there is a tendency for relative poverty to go down in a recession because Mr. and Mrs. Median, if you like, are more likely to be affected by the recession than people who are living around the poverty line. The median household gets more of its income from the labour market, so when unemployment goes up, that tends to affect them more than it affects families around the poverty line who get an awful lot of money from the state. We do not see any reason why this recession should be different from previous ones. I suspect that relative poverty will fall in 2008-09.

Q 4

Steve Webb: Looking ahead to 2020, if we are going to eradicate or get down to 10 per cent, and if we have tax credits and benefit levels below 60 per cent. of median income, can you see any way in which we can achieve the goal? Presumably, there will always be 10 per cent. of children at any one point in time on benefits. Is it credible to think that any party will ever achieve those goals?

Mike Brewer: That is a question about politics rather than economics. We set out in our report earlier this year that it would be possible to get child poverty in the UK down to 10 per cent. by 2020 if benefits were raised high enough, but that would be at some considerable cost and would probably lead to a set of incentives in the benefit system that would be undesirable. I would not say it is impossible to imagine. You are getting at saying that if you know the poverty line, is it not straightforward to eradicate child poverty by just setting benefit rates high enough? I agree with that; it is as simple as that. Again, that leads me to question why we need a Child Poverty Bill to bring that about.

Donald Hirsch: The slight retreat from eradication literally to 10 per cent. might slightly change the answer to that question. It has recently gone up, but I believe that the number of children in workless households went down to about 16 per cent. The number in workless families would be a bit below that, so it is conceivable that we could actually work to get that number down to about 10 per cent. That is important because it illustrates how adopting the 10 per cent. target could, in a sense, make a fundamental difference to the ambition. When it was as close to zero as technically possible, we could not get away from the fact that there would always be a certain number of people who, for good reasons, were not working. The concept of trying to get benefits above the 60 per cent. median level is no longer quite so important, which might be a bit troubling to people who thought that that was being promised.
On the recession point, Mike and I collaborated on modelling work under a year ago to look at initial and projected effects of the recession. Whether or not it was a net decrease or stayed the same, the important thing was that one group of people would be shifting slightly above the poverty line as a result of the poverty line being fairly static, while the income of people in work on low incomes was going up because tax credits were going up. However, that was a bit of a statistical thing and their incomes were not changing very much.
Another group of people were those who were losing their jobs and entering poverty. If those two numbers were about the same, the people who were making the losses were suffering a lot more than the people who were making the gains and getting better off. As was mentioned earlier, that also shows why the pure statistics do not tell the whole story. There really is an issue now about people who have entered deep poverty because of having lost their jobs.

Q 5

Steve Webb: Our understanding is that the figure of 10 per cent. was chosen ostensibly because 10 per cent. is about as good as you get in the EU at the moment, but obviously 10 years ago 5 per cent. was about as good as you got in the EU. Should the goal of a 10 or 12-year strategy be as good as we have at the moment or as good as it credibly could be? Is 10 per cent. too unambitious or would 10 per cent. be extraordinary given where we are starting?

Donald Hirsch: It depends on what you are measuring it against. If you measure it against what Tony Blair said in 1999, it is a retreat. If you measure it against what is a really ambitious goal, it is a fantastic target. In fact, I noticed that the Bill talks about relating to eradication rather than saying that this is eradication. If you look at the Bill carefully, nowhere does it say eradication is 10 per cent. That might be a healthy thing, but it does represent a retreat.

Q 6

Helen Goodman: What do you think will be the impact of having the four measures? You have all talked as though there were just the one relative low-income target, but there is also the material deprivation, the persistent and the absolute poverty level. Do you not think that that makes the impetus of the policy much tighter?

Dr. Ridge: I certainly welcome four measureswe have had several measures for a while, anywayparticularly bringing in and keeping material deprivation. That is how we can directly make a difference in childrens lives. Some of the things that children themselves identify as critical for them are not necessarily things that will be picked up by an income measure, but they are important in everyday well-being in childhood, which is one of the things that we need to keep focused onthe experience of being a child in childhood rather than the future investment that we make in that child as a future worker, for example.
The persistent poverty rate is important, because it will give us a chance to monitor and try to make a difference in the lives of children who experience long periods of poverty and deprivation. However, I would say from my work particularly with children and young people, and we ought to bear in mind that there is a lot of talk about persistent poverty, which is a severe and important problemthat time is a strange thing in childhood. An experience of poverty at a critical time in the childs life can be significant for them in their future well-being and how they carry on through childhood. Two years in my life, sadly, is nothing like the equivalent of two years if you are moving between a primary and a secondary school and unable to make that transition healthily and securely.

Donald Hirsch: I think that that is right, as long as we are not concluding, as has in some ways been suggested by some Government documents, that it does not matter if people are not in long-term poverty or not in poverty three years out of four. In fact, as Tess has said, a few months or a year of poverty might have a very damaging effect. I would agree with what you say as long as the multiple targets are seen in the sense in which they are presented, which is that you have to succeed in all of them in order to succeed. The risk is that the Government say, We have succeeded in two of them, so we have done half well. The reason that one is tempted to think that is because of the way in which the absolute poverty target is formulated, which talks about whether in 2020 a target is met relative to incomes in 2010, which is a 10-year period in which we hope we will have some growth in real incomes. That is so unambitious and it is hard to understand what the use of it is if it is saying, What is the difference between meeting three targets without that one and meeting that one? It is not an additional constraint, so why is it there, other than to be able to say, At least we have met this one?

Mike Brewer: I think having four targets is better than having one, but they are all about income, and I share the reservations that Neil expressed earlier that all the targets are about family income. It is ironic, given what most of my research has been about. I wish that there were a broader range of indicators and perhaps some that related directly to childrens well-being rather than their parents income.

Neil O'Brien: On the specific points about the material deprivation, the data quality is poor in a lot of the survey-based measures. For example, it would appear from the material deprivation statistics that those who are below 40 per cent. of the median income are better off than the children who are between 40 and 60 per cent., which is obviously counter-intuitive. So there are big problems, which the Department for Work and Pensions acknowledges, with that as a measure. In one sense, you are responding to the concern about it all being about income, but it is not a particularly good way of doing that. As has been mentioned, it is still tied to income, because you have people who are 70 per cent. of the median. In a sense you are acknowledging a problem with those targets but not really to my mind addressing it.
On the fluctuations and continuing poverty, I think that is an extremely important point, because people are constantly moving in and out of all those things. You are still just looking at income. The way to hit the target is still to increase benefits, because then you get the number of people down. I am not sure that that is, necessarily, the best use of the money.

Q 7

Andrew Selous: I would like to ask about severe poverty, which is generally regarded as being below 40 per cent. of median income. The figures that I have seem to suggest that that has increased slightly over the past decade. Picking up on our earlier point, on the basis that you should do the most for those who need the most and are in the greatest difficulties, do you think that there would be any merit in tracking those in the most severe poverty, particularly severe, persistent poverty?

Dr. Ridge: I have had a tendency, and I think that I probably still have that tendency, to be a bit cautious about the severest poverty, because so many families are moving and fluctuating in their experiences and income. Families enter poverty for lots of very different reasons and the experience can be very different across families. If we start to focus more and more on families in the severest poverty, we may miss families moving into that and lose the focus. Overall, we have a significant problem for children and they may experience it differently over time, depending on the position of their family at any one time. If we focus more and more on one particular group, there is also a danger that we focus on them in an unhealthy rather than a productive way in terms of support and encouragement.

Q 8

Andrew Selous: So you think 60 per cent. is where it should be and you are comfortable?

Dr. Ridge: I think that 60 per cent. catches a lot of experiences of poverty, as my research has indicated to me. I am not saying that there is not a problem about being in the severest poverty and having long durations of poverty, but family lives can change so much; there is a lot of fluidity in family life. People are trying to get in and out of employment. Some of the poorest children, research has shown, are in those families that are moving between employment and benefits. If you focus just on the 40 per cent., increasingly, you will miss what, certainly for children, is one of the most problematic experiences. Research that we have done at Bath, longitudinally, looking at childrens experiences of employmentlone mother employmentover time has shown that the loss of employment, the drop out of the labour market, the attempts to get back in and then, perhaps, another drop out of the labour market is experienced in a very particular way by children. It is very problematic. Not only is there other research evidence to show that some of those children can be the poorest children but also that that experience can be particularly problematic.

Donald Hirsch: It is obviously very worrying that people are living at such a low level, but one very useful, I think, by-product of such a high-profile campaign as has existed over the past decade has been highlighting the 60 per cent. It seems to have set at least some level of aspiration. The research that I have been involved in on minimum income standards, which looks at what ordinary people believe you need to have an acceptable minimum standard of living, shows that 60 per cent. is certainly not too high, and that you cannot, in general, even at that level get to an acceptable standard of living. The idea that has been put around by this campaign and this statisticthat people below that are at a level that our society does not want to tolerateis helpful and correct. One would not want to feel, Well, actually 40 per cent. is now what we dont find acceptable. I am not saying that that is what you are suggesting, but one would have to guard against that risk.
The other thing about looking at 40 per cent. is that I think that it is fair to say that entitlements would normally bring families with children significantly above that, in theory. The reasons for people being below it will be complex and varied, and will include things such as having to repay tax credits and having transitionary situations. In so far as you are looking at solutions to that issue, you have to look at things that are probably about process as much as anything else, so it is a different set of issues and we need to bear that in mind.

Mike Brewer: I can see the desire to worry about the children who seem to be the poorest in society. We should presumably worry more about someone on 40 per cent. than someone on 60 per cent. of median income, but, as Neil intimated, I am not sure that the data are up to having a statistical indicator, particularly one in the Bill.

Q 9

Andrew Selous: Why are the data more robust at 60 per cent. than at 40 per cent?

Mike Brewer: The data are particularly unrobust at the bottom of the income distribution. As Neil said, if we look at the material deprivation level of people who report very low incomes, we see that they are less deprived than those between 40 and 60 per cent. I do not know the answer; I did some of the research, but I do not know why that is the case. I think that there are various possible suggestions. It is partly a statistical argument. At the moment, I do not think that our data are good enough to accurately measure how many families have the lowest incomes. If we could do that, I think that having an indicator that tracks how many children are in severe poverty would be a very good idea.

Neil O'Brien: In one way my answer to your question would be yes, because I think that you have to look at as many different measures as possible. I also think that the concept of deep poverty is important. On the other hand my answer would be no, because it is essentially the same type of target. You have the samein fact, worsestatistical problems. It is certainly the case that only half of those who are below 60 per cent. of median income are below 60 per cent. of median spending, so that is one illustration of the problems with the data. If you look at the family resources survey, which all this is based on, you will see that about 600,000 people say that they have an income of less than £10 a week. There is clearly a problem with the data there, because they would not still be here if that were the case. So you need to look at as many different measures as possible and have the broadest base of understanding, but a 40 per cent. of median income target suffers many of the same problems as a 60 per cent. of median income target.

Q 10

David Gauke: May I follow up on the point about robustness? I was struck, Mr. Brewer, when you said that the 40 per cent. measure is particularly unrobust. How robust are data relating to income and material deprivation at 60 per cent. of income? You have just touched on that, Mr. OBrien. How reliable are the surveys and such like on which the assessments are made?

Mike Brewer: There is nothing particularly magical about 40 per cent. being the figure below which you suddenly disbelieve the data. It is just that for much of the income distribution, you can see a very clear relationship between the amount of income and the level of deprivationthe lower the income, the higher the deprivation. That relationship breaks down entirely once you get to incomes around 30 or 40 per cent. of the median, such that the lower the persons income, the less deprived they are. I feel like I am verging on giving a statistics lesson, but that is partly about sample size and reliability. There are fewer families who report low incomes, so it is always less reliable to count them. There are more families with incomes lower than 60 per cent., so it is easier to count them. It is also to do with the nature of the families who, in the survey, report that they have no, or very low, income. They are just there, and I just do not believe that income level, or at least I do not believe it as an accurate representation of their long-run resources.

David Gauke: But is there still a problem at 60 per cent.?

Mike Brewer: Yes, there is still a problem at 60 per cent., but it is a smaller problem, because it is basically about a group of families at the bottom whose income does not reflect their standard of living. If you look at those below 40 per cent. you will see that those odd-looking families represent such a high proportion that it distorts the statistic.

Q 11

David Gauke: The draft orders have been circulated among members of the Committee, and one of the things that I found it somewhat difficult to get my head around was the equivalisation of net household incomes, which involves a complicated formula. How objective and scientific are the equivalence scales? Or is that a matter on which a degree of judgment is used in determining what they should be? There is clearly an issue about families of different sizes and the income that you need. How does that work?

Donald Hirsch: I think it is very arbitrary, ultimately. The system was changed two or three years ago to accord with an Organisation for Economic Co-operation and Development way of weighting the different family members, which was itself rather unscientific. The real question is: does this really reflect extra costs in families? The work that I mentioned earlier on income standards, where we have actually looked at the needs of different families, gives some clues about that. The system that we have at the moment is very simplistic, because it gives quite a small weighting to children who are under 14, and then it suddenly doubles when they get to 14. Our research shows that there is an increasing cost over time as the children get older, but it is much more continuous than is shown.
The other point that is particularly interesting concerns singles and couples. The evidence we have collected seems to show that there is a significant underestimate of economies of scale. That is to say, it shows rather higher poverty than would otherwise be the case for couples than for singles. It assumes that couples need more relatively than would be the case with the weightings that we have measured. That could be one reason why one has to be cautious about the evidence, which seems to show that under the present system lone parents have done rather better in reducing their poverty. You have to qualify that by saying that it might be that, in relative terms, the needs of lone parents are being underestimated.

Q 12

David Gauke: Would other witnesses agree that there is an arbitrary element here?

Mike Brewer: The Governments choice of scale was arbitrary. They basically picked the one that seemed to be used most internationally. The OECD picked it rather arbitrarily. You can do objective research into what is the right equivalence scale, but there are different methods, and they never seem to give the same answer. My research in this area basically accords with what Donald has been saying: we give too much weight to couples and so we overstate their poverty compared with lone parents. I am sure it is possible to do another scientific study and come up with the opposite result.

Q 13

David Gauke: We always look at this from a national perspective, but there are disparities between income and costs on a regional basis. London, for example, has a very high level of child poverty, and costs are higher and the median income is higher. What would happen if we started looking at the issue on a regional basis? I imagine that we would find that there is more child poverty in London, but on a national basis, would we have more or less child poverty?

Mike Brewer: I think you would have the same level of poverty nationally but, as you say, you would change the distribution of it across the regions. We looked at this a couple of years ago, and we found what you would expect: poverty in London goes up and poverty elsewhere goes down, particular in Scotland, which ends up with the lowest level of child poverty of all the nations and regions of Great Britain, once you account for the lower costs of living there. But it should not make a difference to the national level of child poverty, because you are just taking account of the differences between the regions.

Q 14

David Gauke: We have talked about the target in the 2010 figure. On current policies, what level of child poverty are we heading for in 2020?

Mike Brewer: The research that Donald and I did in February this year was more of an illustrative forecast than a projection, but it basically said that if between now and 2020 the Government in power follow the current rules for uprating benefits and tax credits, child poverty will start to rise, and we will probably end up roughly where we were in 1998. Why is that? It is because the current rules for uprating benefits and tax credits increase them much less quickly than average earnings. Inevitably, the relative incomes of the poor will fall back.

Q 15

David Gauke: You have said that the 2010 target is not going to be met. For how long has that been apparent?

Mike Brewer: I guess that I should give the Government some benefit. They do have a few weeks until they have to announce the 2010 rates of tax credits. It is clearly possible for the Chancellor to announce increases of the order that we think necessary; we think they would cost him about £4 billion a year. It is hard to imagine him announcing a £4 billion tax rise to pay for it, but it is not impossible. I grant the Government that. Donald and I started forecasting child poverty in 2010 back in 2006, and we have basically been updating our assessment of what needs to be done since then. I would not pretend that this is an exact science, but for the last three years the story has been that the Government need to spend more on tax credits if they want to hit the target.

Donald Hirsch: The important thing is that when one makes these projections, one makes them on present policies. Policies are constantly being developed. Mike and I said in 2006 that the Government needed to do a certain amount, and they have done roughly half of that and closed half the gap. Looking ahead, that sort of projection can be quite useful in the short term. In the long term, to say Its going to get worse if nothing is done shows the magnitude of the task, but that should never be taken as a forecast. On the other hand, it can show the importance of a more systematic method of uprating, for example. That at least gives a starting point that is not moving backwards, so that all the other things that will have to go into a strategy are not starting from such a dismal projection.

Q 16

David Gauke: Coming back to your point about the 2010 targets, Mr. Brewer, I am sure that you must be right. The pre-Budget report is to be produced in the next few weeks. Presumably, if there were a legal obligation to meet the 2010 target, the Government would have to increase child tax credits by £4 billion. Is that how you read the operation of the Bill?

Mike Brewer: Im not sure what the Bill means. If there were a target that the Government were legally forced to hit then, yes, mechanically they would have to increase tax credits by that amount. I dont know whether the Bill actually requires the Government to do that. I suspect the man on the street might think that is what a legal obligation would force the Government to do.

Q 17

David Gauke: Presumably it would have been possible, some years ago, to identify the need to increase tax credits under this type of rubric, had it applied.

Mike Brewer: Yes, and we did that. It was done outside Government, not by Government.

Donald Hirsch: By 2006, we could say that long-term measures were going to be too late to take effect, because they always take a long time to take effect. It would be unfortunate if what the Bill did was to cause Governments not really to take those long-term measures, but to get to the point at which we hit the panic button and then just pass or transfer. Lets be clear: the kind of resources you would have to transfer even to get to a 10 per cent. target would be massive, and it would distort all sorts of things if you did it entirely through a redistributive tax and benefit mechanism.

Q 18

David Gauke: If I might, I shall ask one more question that flows immediately from that. Is your argument that in the early years of the operation of the Bill, a Government should take long-term measures to reduce child povertymeasures that might not necessarily have an immediate, visible impact on the annual targets and the number of people who are taken out of poverty? You could have an immediate impact by raising benefits, but to achieve the aims of the Bill you need to address the longer-term causes of poverty in the early years.

Donald Hirsch: Yes.

Mike Brewer: Yes.

Neil O'Brien: That seems to be the political problem with the Bill; it is difficult for any politician to say, We are going to miss the legally binding target that we set for ourselves, but we are instead spending the money on something that will be better in the longer term. To me, that is the problem with periods in the Bill.

Q 19

John Howell: You described the Bill as being about income and income targets, but the delivery of much of what the Bill wants to achieve is pushed over to local government. Do you see a mismatch between those targets and how the Bill expects them to be delivered?

Donald Hirsch: There are certainly very limited things that local government can do on its own. If your interpretation is correct and is used to get central Government off the hook, then I think that is true. There are a lot of thingsnot only what the Treasury does in terms of shifting money, but relating to resources for the education system and all sorts of thingsthat are influenced or decided at national Government level, which I assume will be in some sort of national strategy. If the fact that the monitoring is largely put on to local authorities causes the Government to take their eye off that ball, then that would be true.

Dr. Ridge: The local authorities role is going to be critical, in terms of how things work for children and young people in those areas in particular. I welcome local authority involvement, but it is going to be about resources and forging good partnerships. Also, some of the provision in the Bill, about communicating and consulting with children and young people in families in those areas, could result in very good, well-centred policies that are informed with a much stronger grass-roots perspective than they might otherwise be. Child care policy is an example. I also would like to point out the important issue of low-income children in rural areas, who very easily miss out when we are looking at overall measures. The experience of being poor in a rural area is a very particular one. Local authorities, with this kind of duty on them, may well be able to provide better quality services and a better response to those children and young people.

Q 20

John Howell: Earlier, one of you said that something pretty big needs to happen. Is that something big going to happen as a result of the delivery mechanisms set out in the Bill?

Neil O'Brien: It seems to me that there is a complete mismatch between the wider strategy and the targets in the Bill. In a sense, you are not going to be voting in this place on the strategy and all those things; you are voting on just a target that is very much focused on central Government and everything they are doing. So, in answer to your previous question, there is a complete mismatch.

Q 21

John Howell: My next question comes out of Dr. Ridges point. There has been some comment that the Bill does not actually force councils down the line, but maintains an approach that pushes them more towards area-based programmes rather than towards family-by-family programmes. Given the success of family-by-family programmes, do you think there is sufficient flexibility in the Bill to allow it to achieve anything good on the ground?

Dr. Ridge: I would certainly hope so, which is not quite the same as there definitely is. I think that the intention is to achieve that kind of response on the ground. The partnerships, the duty to consult and those kinds of arrangements could result in a much better grass-roots response, and in local authorities responding in more family-friendly ways to some of the issues they face.

Q 22

John Howell: There is always a huge gap between intentions and achievement, though.

Dr. Ridge: Yes, absolutely.

Q 23

Karen Buck: You talked a minute ago about the estimated £4 billion cost of meeting the 2010 target. I dont know if you heard it mentioned in this mornings evidence session, but you will have looked at the report by the Centre for Social Justice estimating that it would be possible, for around £2.5 billion, to change fundamentally the work disincentives. Don, you in particular have done some work on the estimated cost of povertyaround £25 billion a year. Can the four of you help us to understand the relationship between the estimated cost of poverty and the cost of investing in meeting short-term targets, whether they be work incentives or the £4 billion in tax incentives? How quickly would it be possible to start offsetting expenditure on poverty against the money you invest to tackle it?

Donald Hirsch: The honest answer is that there isnt a sudden gain. Some of the £25 billion could come quite quickly as a result of children who are no longer in poverty requiring fewer services for when their lives go wrong, although it takes a while for a society to adapt, even in those terms. Some of it will be about the long-term impact, because if you have grown up in poverty, you might have difficulties as a teenager that require extra spending, and some of it will be very long term. About half of it is for future labour market outcomes. So, the honest answer is that it helps in terms of seeing the order of magnitude. One of the things that you can doit is only one of the thingsis to be a bit more generous on the direct transfer of income. It is just showing that the cost of doing that is pretty low, compared with the overall costs we are faced with all the time from having children with these outcomes. One of the real difficulties that the Joseph Rowntree Foundation, which I have done work for, has had is that it is always easiest to model the cost and results of poverty on doing something such as income transfer. Once you go beyond thatand we have triedit is difficult to say how much it will cost to have an education system that is fairer and has better outcomes for children on low incomes. The shocking amount that this costs to society is important, but it will be hard to persuade the Treasury that this stream of money is going to come in as a result of this investment.

Q 24

Karen Buck: What about specifically targeting money on removing work disincentives?

Mike Brewer: Then, of course, you get some money back straight away. You get increased tax revenues, and that was the kind of sum that the Centre for Social Justice arrived at when it worked out the net cost of its package. Once you allow for the fact that improving incentives encourages people to work, you typically still do not raise money overallyou are still spending money, but it will obviously offset some of the costs. I agree with Donald that if you are thinking of tackling child poverty, it is an investment in children, and the pay-offs are going to take a generation. But if you are thinking about tackling work disincentives, yes, there is a pay-off.

Q 25

Karen Buck: This is the same question as the one Steve Webb asked this morning. Is there any risk that investing in tackling work disincentives as a means to encourage people into employment simply displaces costs from one group of people to another? Unless the labour market grows, you are not necessarily going to make any savings in terms of gross expenditure.

Mike Brewer: I think that most economists would argue that the labour market would expand so that people who wanted to find a job would be able to do so. I dont think we see that as the problem.

Q 26

Steve Webb: May I clarify the question? You are actually right, Karen. My worry about what the Centre for Social Justice seems to be saying is that there is a kind of free lunch here. It is suggested that some £2.5 billion could be spent up-front doing nice things to the benefits systems, and 600,000 people will take jobs. You can then take all the tax revenues, the benefits savings, the growth in the economy and the VAT they create, and that pays for it. I feltthis might be pejorativethat there was a slight free lunch feel about that. Surely, to some extent, you are just displacing other unemployed people. You are down as an advisor to the centres report. Has it taken any account at all of the fact that there is a whole set of people who could have had those jobs but did not? You said that the whole thing will just expand.

Mike Brewer: Yes, as I say, I think the labour market will expand to accept those people. Perhaps the Centre for Social Justice exaggerated how quickly that will happen, but I think people will respond to improved financial incentivesthey will begin to work and help offset the costs of doing this. But the package that the centre came up with will still cost the Government money, so it is not a free lunchit could still cost them £3 billion after the behavioural responses.

Q 27

Karen Buck: To what extent is it helpful to consider the characteristics of groups most liable to fall into poverty when developing a policy response for them? Does that help you to target and focus your resources, or does it run the risk of pathologising the poor and missing as many people as you want to reach?

Neil O'Brien: It seems that that depends on what you mean by a group. If you are thinking about children in care who are not adopted as a group, that would be an extremely good place to start, because we know that the outcomes for those kids are absolutely terriblethey are in the deepest kind of poverty.

Karen Buck: I mean lone parents, black and minority ethnic groups and large families, for examplethe major groups, really.

Neil O'Brien: I am less clear about what exactly you mean about targeting them.

Q 28

Karen Buck: Quite a few of the discussions in the last few hours in the Committee have been about people at risk of being in poverty, aspects of family breakdown and all the things that are potentiallydepending on which perspective you are coming fromdrivers of poverty. Policy has frequently chosen to target resources and policy prescriptions on particular characteristics, family structures and risks of falling into poverty. There might well be an argument for that, but it would be interesting to know your perspective on whether, when one is trying to reduce that number of 2.9 million children currently living in poverty, the right way to do it is to say that we need to worry in particular about lone parents, couples or large families, or whether it is actually simply better to stick with the income indicator targets that are on the face of the Bill?

Dr. Ridge: I think there is a problem with thinking about groups, in the sense that people belong to multiple groups; they do not just belong to one group. There is a really important need to understand the challenges facing families in particular circumstances. In certain circumstancesif you are a lone parent and you belong to a BME group with disability in the familyyou have a multiple set of challenges to face in order to try and manage on your income and with your life challenges. The danger of grouping people, particularly a simplistic grouping of people, is that it very easily leads toas you would saypathologising people, with those people being conceptualised as having a certain set of characteristics, however they might be determined. What is really importantand this is probably one of the strengths of the Bill and one of the strengths, increasingly, of thinking things through in terms of policyis the need to engage with people in different circumstances to understand the type of challenges they face in relation to some of their characteristics that might define them. However, actually targeting groups can be problematic, because peoples lives are very diverse.

Donald Hirsch: I think that most of the policies that you talk about are targeted to some extent. Another issue is whether you do wide or narrow targeting? The risk in narrow targeting is that you focus on people who are already in situations of multiple deprivationwhen a lot of problems in the family are compoundedand you then say that those are the problems and that if we can just solve them for those groups, we can forget about the rest. The problem with that is that a much wider group of people are leading lives that have very little slack in them. They are very vulnerable to things that go wrong. If you wait until all those things have gone wrong, you are not really adopting a preventative strategy. The new deal for lone parents was targeted on lone parents, but they represent 40 per cent. of families who are in poverty. We are doing wider targeting all the time. We have to be intelligent about looking at people whose lives have risk in them, not just at the ones where there has been a complete breakdown.

Q 29

Graham Stuart: Is there is a consensus on the balance of the long-term measures that are required, because that would appear to be the unstated assumption in the Bill? I particularly ask that because the Government have done a lot with what they regarded as long-term measures to try and tackle deprivationSure Start, various credits, new deal programmes, doubled school spending, skewing funding to areas of deprivationyet children on free school meals have moved further behind. The number of children leaving primary school unable to read and write has not really moved, and the number not in education, employment or trainingeven before the credit crunchincreased, reaching a million. In the Bill, there is an assumption that if only we got some money and got going, we could sort that out. The Government did have money, and they did get going, but that did not sort it out.

Neil O'Brien: In a broader sense, one of the findings of a lot of social science research is that the relative pound for pound efficacy of earlier intervention and so on is generally greater than that of dealing with problems that have happened. You, quite rightly, raise a question about whether the specific policies are the right ones and whether they are effective, which I think is a different thing. As elected politicians you are constantlynaturallyunder pressure to do things that will deliver results now, rather than spending a lot of money to invest in something that will produce results in 20 years time when you might no longer be an MP, or your Government may be long gone. You therefore do not want to introduce anything, such as the Bill, that pushes you further along the direction of bias between the short-term and the long-term solution. Ultimately, those kinds of earlier interventions are better pound for pound and you need to create a framework that enables the multiple parties that could be in government over time to keep concentrating on them, rather than being distracted towards thinking that the short-term solutions are right.

Q 30

Graham Stuart: Do we have a consensus, because we heard evidence this morning from a witness who said that the Sure Start programme simply had not touched the families in greatest needthe sort of families that that witness deals with on a daily basis? Is there consensus about what needs to be done for the long term? There is political pressure not to do the long term; as I say, this Government, to their credit, tried to do things for the long term. Is there a real understanding among the academic community that there are measures that will really make a difference?

Donald Hirsch: There is a consensus that some of the areas that you are talking about are the right things to be working on. There might be differences over whether the particularities of the strategy are right, whether the long term has actually arrived and so on. The areas in which that is the case are certainly child care and early intervention. You mentioned achievement by children on free school meals. Recent figures have shownand some may take issue with thisthat there is some improvement there. Who knows if that is the beginning of a trend. Again, there is agreement that you need to work on that and do whatever we can.
There is one area where, in theory, there is some agreement that something needs to be done, but there is not much agreement over what should be done. I am referring here to the question of how you ensure that people who are going into work get better jobs. It is very hard to imagine that in 2020, if we have the present distribution of work among the lower-paid group of parents in terms of the hours that they work and the earnings they receive, we will be able to meet the child poverty targets. We would need to have a massive amount of tax credits to get such people out of poverty. People generally agree that we need to improve the quality of jobs and make them more family- centred. We must ensure that parents have the ability to progress and to do well in the labour market. However, by comparison with those other areas, I do not think that anybody has a clue how the Government should do that. That is probably the biggest challenge of the strategy.

Dr. Ridge: There is general consensus, as Donald just said, across several particular areas. I should like to point to a couple where ever such a lot more could be done. One of them is school. You particularly mentioned the experience of free-school-meal children at school. One of the things that we have been very slow to approach and to try and address are childrens actual experiences within school as a social experience. There has been a lot of focus on literacy, numeracy, truancy and school exclusions, but the research on children that I have done and have reviewed for the child poverty unit, and that others have done as well, shows that the biggest problem for low-income and disadvantaged children in school is exclusion within school. By that I mean those social experiences of being unable to take part in the same way as other children. I believe that you have seen a video of children talking about their experiencesI could be wrong about that.

Andrew Selous: I have.

Dr. Ridge: Thank you.
For example, children whom I spoke to found the delivery of free school meals in their schools so problematic that they did not want to take them up, yet they would be an enormous advantage to them. A small boy once said to me that his favourite thing in life was his free school meal ticket, yet other children refuse to take that up because the delivery is so heavily stigmatised. So, the delivery of services to families and children should be done in a way that they feel is appropriate and does not stigmatise and single them out. The social experiences of school and the ways of incorporating children and giving them a social inclusion within school is really important, and we have not begun to tackle that at all.
I do not think child care has been approached, although it is an incredibly important thing. Sadly, it is missing as a building block here. Child care should be in here, even though there is other legislation about child care, because it is such an important factor for children. A lot of children I have spoken to recently in employed families and in low-income families trying to get into employment are very resistant to the type of child care that is on offer to them. We have a problem in the sense that we have not started to think about child care from the perspective of children first. What we have thought about is the labour market first and, sadly, I think we are still doing that. There are definitely areas where there might be consensus that it is the right area on which to target policies, but where we may not be getting it right or have the right focus still.

Q 31

Graham Stuart: May I ask you about minimum income standards? Again, we had evidence this morning about that. If the Bill is not going to prescribe minimum income standards delivery because of the costs mentioned, surely we should at least ensure the publication of minimum income standardsnumbersand monitor that over time?

Donald Hirsch: As someone who has produced some, I think I should reply first. The minimum income standards that we produce do, as I said earlier, serve to strengthen and in some way justify the idea of these kinds of targets because they show that looking at relative poverty is not just some kind of abstract thing; it is about expressing what the standards and expectations of our society are. It is more credible to do that if you can actually say why that is the case, rather than just having an arbitrary statistic.
The other important thing about having the standards mentioned within this process is that it actually tells you a bit about what sorts of things people need to spend their money on and why. Our work includes a lot on how familiesmembers of the general publicrationalise what is a necessity and why that is. It is a way not just of challenging what numbers you use, but of strengthening what it is you are trying to do and helping to show the public and perhaps even MPs why it is that people need these sorts of things as a minimum.

Q 32

Graham Stuart: So would you like to see an amendment to the Bill to ensure that, as you say, something that puts down the price of a can of baked beans is part of a familys budgeting and what the budget needs to be to live any reasonable quality of life?

Donald Hirsch: That would be very welcome.

Dr. Ridge: I would certainly echo that. I think it is very important.

Q 33

Judy Mallaber: I must say that I contest the tone of some of the questions that have been askedfor example, in relation to there being no improvement in the standards of reading and writing for primary school children when they leave school, and in relation to child care, which has improved enormously in my county of Derbyshire.
If I could just come back to the text of the Bill, Neil OBrien made the comment some while ago that there was a mismatch between the strategy and the targets in the Bill. I do not really understand that comment because targets have been set out as the first duty of the Secretary of State. The second duty of the Secretary of State is about drawing up a strategy that concerns two things: first, looking at meeting the targets and, secondly, ensuring that children do not experience socio-economic disadvantage. A number of headings set out what would be part of the components of that strategy, which in my view would also encompass child care. As that is my interpretation of the Bill it, in terms of how effective the way in which we should draw up strategies is, I wonder if you could comment on how effective you believe those strategies might be. Do you have any other comments on how you think they should be developed, as set out in clause 8?

Neil O'Brien: I am sure that the Government will come up with a broadly based and sensible strategy for child poverty in the round, and that is a good thing. The point I was making is that you then selectively privilege some of the aspects of child poverty and turn them into legally binding targets. But you do not do that in relation to some of the other things you are going to be doingyou do not have a legally binding target to make sure that more children are adopted, although I know that the Government did set a target and try to raise the rate a few years ago. You are taking some of the parts of what you do and privileging them hugely by turning them into legally binding targets, which I worry distorts your overall efforts, because all these different things are potentially just as important as the income target that you are turning into a legally binding target. Does that make sense?

Q 34

Judy Mallaber: Yes. Does that mean that your inclination will be to have no targets or to have far more targets? How do you take account of the fact that there are targets in other parts of Government policy that would feed into this strategy? We are bedevilled. We are told that we have too many targets and that we should not have any, then everybody comes along and says that we want a target for this, that and the other. You cannot win.

Neil O'Brien: My answer to that question is fairly clear. I think that you want a broader range of targets and you do not want to privilege a few of them over others. So you want, in a sense, to be neutral between the different types of approaches to challenging child poverty, rather than saying that one thing is much more important than another by turning it into a target.

Q 35

Judy Mallaber: So which targets would you put in?

Neil O'Brien: I am not sure that I could give you an answer now for all time that there should be a single set of targets. In any sensible research programme, that set of targets would probably evolve over time and you might add to it as you find new things that are important. Near the start, I mentioned the sort of things that I think are the good causers-of-poverty type of targets. So I mentioned living in jobless households, or people being NEET themselves; low educational attendance, or erratic school attendance; living in substandard accommodation; infant mortality rates; serious childhood injuries; registration to the child protection register; teenage smoking, teenage obesity and teenage pregnancy; and children in care who are not adopted. So all those things are important and I do not think that you should just turn only one part of what you are trying to do, which is the income target, into a legally binding target.

Judy Mallaber: Would anyone else like to comment?

Donald Hirsch: If I may slightly disagree with Neil, I would like to comment. It seems to me that, if you honestly apply the objectives and targets of this Bill, you will have an enormous task on your hands and a task that is very multi-faceted. What Neils argument rests on, I think, is a view that the Bill will distort the situation to certain mechanisms that are easier to measure. I think that that is a slightly gloomy interpretation. One would hope that, perhaps with the help of this child poverty commission, there would be the discipline of saying that you tackle some of these issues about employment, child care and other things that will be very important to get right in order to meet that income target. In so doing, you would be fulfilling quite a wide range of social objectives.
For example, if we think that somebody who is in school now might in 10 years time be a parent living in poverty if they do not get good enough qualifications, that person, who has had a disadvantaged upbringing themselves, needs to do better at school, to help to fulfil these income targets. That is already quite a broad strategy.
So I think that the key thing is to ensure that you create a commission with some clout and some teeth, and one that provides a sort of discipline to ensure that you really are tackling these problems in the round. The risk of having lots and lots of targets is that they duplicate targets elsewhere and also that each one of those targets itself becomes a potentially distorting measure.

Neil O'Brien: The bottom line is that you have a certain budget in the end and you have to choose where a pound should go. Is it better to spend the pound tackling lower educational achievement in order to get a good result later, or is it better to spend it on a tax credit today? That is a question for good academic research that the Government should undertake. However, you do not actually have that choice if you set these targets. You have got to choose, as David Gaukes question implied earlier on; you must choose to hit the target with a tax credit now.

Donald Hirsch: Not if your target is established for 10 years ahead. They have to publish a strategy now. It is true that, if that task got neglected now, in eight years time you would be in that situation. However, in 2010-11, when the strategy is published, there will not be that pressure.

Neil O'Brien: Let us say that something happens to the economy that takes the median income up a lot over the next 10 years and a new Government arrive in 2018, and they find that they are a long way away from the 60 per cent. median income target. That Government really will not have a choice at that point, politically, other than to spend the money on tax credits, even if that is the wrong thing to do.

Q 36

Sally Keeble: My first question is for the IFS. At the time of the fiscal stimulus, which was £2.6 billion, the cost of eradicating child poverty was virtually exactly the same amount. A read-across would be too simplistic, would it not? How much of child poverty should be through redistribution and how much do you think it should be through the other targets in the Bill?

Mike Brewer: This is similar to the previous question. The Bill requires the strategy to be both about tackling child poverty as defined by the four indicators and reducing socio-economic disadvantage among children.

Q 37

Sally Keeble: I know that it does, but an argument is that, if we had done the £2.6 billion through child tax credits, we would have made a real dent in child poverty.

Mike Brewer: Yes, you certainly would. The Government had a choice, particularly at the time of the fiscal stimulus. They had a choice between where to spend the money and they chose, for example, to keep the higher rate of personal allowance, which they introduced under a personal, temporary measure, rather than spend it on tax credits. The Government could have spent some on tax credits, as you said. That would have made a severe dent in child poverty, and I might well be sitting here now telling you that the Government were on track to hit their child poverty target.

Q 38

Sally Keeble: Has the IFS costed out the other elements in the Bill?

Mike Brewer: We have looked at the relative poverty measure and what would happen to it in the future, based on current policies. The particularly important things are current policies on benefit and tax uprating. They become the most important things when forecasting 10 or 15 years in the future. We thought that, on current policies, child poverty would rise back to its 98 levels by 2020.

Q 39

Sally Keeble: I want to ask more about child care. Bearing in mind where we were some years ago, the changes are very dramatic. Which bit of child care do you think has not been dealt with? If you take into account the child care element of the tax credit system, the early years curriculum, the childrens centres and the specifications for the childrens centres and for early yearsthings like outdoor covered play areas, which seem to be entirely child-focusedwhat practical steps do you think should be taken, and what is being costed, that would further improve child care?

Dr. Ridge: I dont think that I will be able to help you on the costed element. I agree that a lot has been done on child care, but it is interesting that research with children still shows that they are quite resistant to a lot of child care that they are either receiving or would receive if their mothers, or mothers and fathers, went to work.

Q 40

Sally Keeble: What are they resistant to, and to which age group of children are you referring? I am thinking of two-year-olds screaming as they are led into a childrens centre.

Dr. Ridge: Perhaps we mean children of a different age. For a start, we still need to tackle to a much greater extent the type of child care that we provide for older children.

Q 41

Sally Keeble: Which age?

Dr. Ridge: I would say nine, 10 and above. There is a point at which lone mothers, in particular, do not want their children coming home and letting themselves in, although a lot do that while their mothers are working. Child care does not really capture in any way the type of care or provision that they might want.

Q 42

Sally Keeble: How about the extended days? I completely agree that there is always room for further improvement in child care, but extended day provision in quite a number of schools has been extremely good, and has looked at precisely the group of children you are talking about. It has provided services precisely for them. The schools in the disadvantaged areas have probably been the best, so will you be more specific about exactly what is needed? If we are going to recommend it to the Government, we must be clear about exactly what is needed.

Dr. Ridge: The thing about extended schools and extended days is that a lot of disadvantaged children are not having a terribly good time at school, and school is not necessarily the place at which they might want to stay after school has finished. I can only tell you what has been picked up in qualitative research, and that is the case.
I have done a longitudinal study of children in lone-parent families. A group of children in the study were very resistant to any child care, because they felt that it was very stigmatised. For example, one girl said, Child care is for scabs. I think that that happens where child care becomes identified with a particular type of provision, and is not rather a suite of opportunities after school that might be offered to children.

Q 43

Sally Keeble: So would it be more helpful if we thought of child care more as youth services? If you tell a nine or 10-year-old that they are going into child care, they will say, Not me. Northamptonshire county council, which is Conservative-controlled, is scrapping all its child care and youth services. Should we not be looking at the role that those services have to play in the total suite of services for disadvantaged children?

Dr. Ridge: Yes, I agree with you totally. One of the things that slightly older children, aged around nine or 10, who are attending child care talk aboutthis is in other studies as wellis that they quite often find themselves in care with younger children. So a lot of the time they are basically getting told off for knocking young children over, or they feel that they are not doing the things that they want to do. If children become very resistant to going to child care, it narrows the opportunities for mothers to work beyond school hours, at the beginning or the end of the day.

Q 44

Sally Keeble: Would it be more sensible, bearing in mind that we are talking about a Bill, to look at wording that relates to child care and youth services, rather than just child care, so that we capture the age ranges?

Dr. Ridge: I totally agree. I think that at that particular age there is still a need to be looking at a very different type of provision.

Donald Hirsch: It would be misleading to say that the only shortfalls at the moment are with older children. A lot of other shortfalls have been picked up, one of which is atypical hours, not just provision up until 6 oclock in the evening. It is very difficult to get that. You talked about the child care tax credit; there has been a very poor take-up of that. Another issue is the argument for more direct funding of places, rather than funding through means-testing. Also, things can look quite good on paper, such as the guarantee of free child care for three and four-year-olds for 15 hours, but that is very difficult to match with a job, and you end up getting extra charging. There are a lot of different ways in which many parents are not finding the child care opportunities that they need, despite all the improvements that have been made.

Sally Keeble: It would be very helpful to have a note about the specific measures.

Donald Hirsch: I can send a summary of our paper on the issue.

Q 45

Andrew Selous: I would like to ask a question on work incentives or disincentives, and then follow up on something that Donald Hirsch said earlier about in-work poverty. Have any of you done any research on the effect of increasing levels of tax credits on labour market incentives and disincentives? That is an area that the Treasury traditionally takes very seriously. For example, when earnings disregards were being looked at in the child maintenance system, the Treasury pored over them very carefully to try to see what the impact would be on the labour market. Are there any potential worries that, by trying to meet the targets and by the possible ramping up of tax credits at some point in the future, you might skew the labour market somewhat and leave people on benefits? Such benefits might put them just above the poverty level, but would not give them a very good quality of life.

Donald Hirsch: One general thing is that if you rely excessively on in-work tax credits, rather than wages, to get people who are out of work out of poverty, you will have a lot of people on very high marginal withdrawal rates. That creates huge difficulties and a sense of injustice, in that if you work harder, get a promotion, train or whatever, you are not getting much of a reward for it. That is the real reason why, as I was saying earlier, you have to look at the market returns alongside the actual transfers.

Q 46

Andrew Selous: Okay. Following that up, you made a comment earlier, Donald Hirsch, where you quite properly referred to the large levels of in-work poverty. We all talk about work being the route out of poverty, but there are huge numbers of children whose parents are in work and yet still in poverty. That seems a rather neglected area sometimes, in terms of what we do with those parents to try to enable them to earn a higher income. Karen Buck will remember that a previous Chair of a Select Committee that we served on in the last Parliament used to talk about A, B, Ca job, a better job, a career. Do you see that as an important area? Do you see anything positive being done that you would alight on, and that would cause you to say, The Government should look further in this area?

Donald Hirsch: Yes. There are some broad things about training and how we upskill our whole work force and create better jobs. A tricky aspect of that relates to couples in which there is presently one earner. There have been indications from the Government that the solution has to be getting a second earner in that family. There is a case for that, but it is telling families how you want them to behave, and any Government drawing up a strategy will need to be clear about the extent to which they rely on that particular phenomenon.

Q 47

Andrew Selous: Right. I am sorry, but you are still not quite getting my point, which is that if someone gets an entry-level job, they may be in work, but the reason why there are a lot of children in poverty is that those people never get above an entry-level job. They are still doing something with pretty basic skills all the way through their working lives, and that does not enable their children to get out of poverty. How do you upskill people who are in low-paid work, to enable them to progress in work and earn higher pay? That is what I am trying to get at.

Donald Hirsch: I agree with that, but what I am saying is that a lot of in-work poverty has to do with the low number of hours of work in the family, and not just a low wage. Both are important.

Mike Brewer: I agree that the issues you have highlighted are important. I wish I knew how we could get parents who are in low-skilled jobs that are going nowhere into careers. That is incredibly difficult. I do not think that we have very good evidence about what kind of interventions from Government work in such an area.

Q 48

Andrew Selous: You are not aware of anything around the world that has been successful, such as night-school programmes, mentoring or anything like that?

Mike Brewer: I am not aware of a magic bullet, if that is what you are asking.

Martin Caton: We will have one more question. Helen Goodman, this will most likely be the last question this afternoon.

Q 49

Helen Goodman: I want to direct a question to Donald and Mike. What do you believe the impact of the minimum wage is on child poverty? If we did not have the minimum wage, what would be the impact on child poverty? Have either of you done any simulations on the subject?

Mike Brewer: The minimum wage is very important for lone parents in keeping their income up, but it is one of the perversities of the way we measure poverty that the minimum wage is also very important for households at and around the median income, and for some well-off households. When you think about relative poverty, the minimum wage is not a great anti-poverty device, but it is very important for some low-wage earners.

Donald Hirsch: I think that low pay is very important. Often it is about people who are somewhat above the minimum wage being able to progress further. It is not always the case that there are problems for people who are at the minimum wage. When the minimum wage came in, it brought up fewer people than we thought, so low pay is definitely an issue. The minimum wage, at its present level, is not very direct.

Q 50

Helen Goodman: Are you suggesting that there is a case for having a higher minimum wage or a lower minimum wage?

Donald Hirsch: There is a case for having a living wage, which would be higher than the present one.

Q 51

Martin Caton: Dr. Ridge, I stopped you answering the previous question. You have a couple of minutes; would you like to answer it?

Dr. Ridge: Very quickly, I wanted to talk about work and give you a quick sense of the qualitative work that we have done longitudinally with lone parents, a sample who were keen to work. When they go into employment, the critical thing for them is sustaining their employment. That was a real struggle. Everything changed all the time for parents. The problem was the fluidity, in terms of hours of work and types of work. At the end of the sample, only one person had not had some change in either hours, job, spells of employment or spells of sickness. They may find themselves in a job but then have the employer change the goalpoststhey have sorted out their child care and suddenly they are expected to work on a Saturday. That bottom end of the labour market is very unstable and very fluid and, when you are trying to manage child care as well, that is particularly important. You talk about a job, a better job, and a career, but for the women who have been in work for four to five years in that sample, their notion of advancement was, almost exclusively, permanence. That was their notion of advancement: just having a job that was permanent and in which they were aware of what the rules were going to be.

Martin Caton: I am afraid that that effectively brings us to the end of the time allotted for the Committee to ask questions.

Ordered, That further consideration be now adjourned.(Mr. Mudie.)

Adjourned till Tuesday 27 October at half-past Ten oclock.